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Evaluating Health Care Programs by Combining Cost with Quality of Life Measures: A Case Study Comparing Capitation and Fee for Service

Authors

  • Richard Grieve,

    1. Department of Public Health and Policy, London School of Hygiene and Tropical Medicine, Keppel St., London WC1E 7HT, U.K.,
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    • Address correspondence to Richard Grieve, Ph.D., Lecturer, Department of Public Health and Policy, London School of Hygiene and Tropical Medicine, Keppel St., London WC1E 7HT, U.K. E-mail: Richard.Grieve@lshtm.ac.ok. Jasjeet S. Sekhon, Ph.D., Associate Professor, is with the Travers Department of Political Science, Survey Research Center, University of California, Berkeley, CA. Teh-wei Hu, Ph.D., Professor of Health Economics, Emeritus, is with the School of Public Health, University of California, Berkeley, CA. Joan R. Bloom, Ph.D., Professor, is with the School of Public Health, University of California, Berkeley, CA.

  • Jasjeet S. Sekhon,

    1. Travers Department of Political Science, Survey Research Center, University of California, Berkeley, CA
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  • Teh-wei Hu,

    1. School of Public Health, University of California, Berkeley, CA
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  • Joan R. Bloom

    1. School of Public Health, University of California, Berkeley, CA
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Abstract

Objective. To demonstrate cost-effectiveness analysis (CEA) for evaluating different reimbursement models.

Data Sources/Study Setting. The CEA used an observational study comparing fee for service (FFS) versus capitation for Medicaid cases with severe mental illness (n=522). Under capitation, services were provided either directly (direct capitation [DC]) by not-for-profit community mental health centers (CMHC), or in a joint venture between CMHCs and a for-profit managed behavioral health organization (MBHO).

Study Design. A nonparametric matching method (genetic matching) was used to identify those cases that minimized baseline differences across the groups. Quality-adjusted life years (QALYs) were reported for each group. Incremental QALYs were valued at different thresholds for a QALY gained, and combined with cost estimates to plot cost-effectiveness acceptability curves.

Principal Findings. QALYs were similar across reimbursement models. Compared with FFS, the MBHO model had incremental costs of −$1,991 and the probability that this model was cost-effective exceeded 0.90. The DC model had incremental costs of $4,694; the probability that this model was cost-effective compared with FFS was <0.10.

Conclusions. A capitation model with a for-profit element was more cost-effective for Medicaid patients with severe mental illness than not-for-profit capitation or FFS models.

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